Capacity Insurance Definition & Meaning | Insurance Term | CSIMarket
CSI Market
Sign In | Register

Glossary

Capacity Insurance

Insurance Term

Capacity insurance is a type of reinsurance that helps insurance companies manage their risk exposure by transferring a portion of their liability to another insurer. In simple terms, capacity insurance is insurance for insurers. It is commonly used in the insurance industry to spread risk across multiple companies, minimizing the financial impact of potential losses.

Capacity insurance is particularly important for insurance companies that are exposed to large, catastrophic events. For example, a hurricane that causes widespread damage can result in significant losses for insurance companies that have insured properties in the affected areas. By using capacity insurance, the insurers can spread their risk exposure across multiple reinsurance companies, reducing the financial impact of any individual event.

Capacity insurance is typically purchased by insurance companies from reinsurance companies. The reinsurance company agrees to take on a portion of the risk of the underlying insurance policy in exchange for a premium payment. The amount of capacity insurance purchased by an insurer depends on the amount of risk it wants to transfer to another insurer and the cost of that coverage.

In summary, capacity insurance is an important tool for managing risk in the insurance industry. It helps insurance companies minimize their exposure to catastrophic events and allows them to allocate their capital more efficiently. By transferring some of their risk to a reinsurance company through capacity insurance, insurers can protect themselves against large losses and ensure their financial stability.


More Glossary Terms Beginning with C
  • Calcined
    To be heated to a high temperature, but below the melting or fusing point, causing loss of moisture, reduction or oxidation or thermal decomposition (a chemical reaction where a single compound breaks up into two or more simpler compounds or elements when heated).
    Manufacturing Term Letter: C
  • Call Option
    An option that provides the right, but not the obligation, to buy an underlying futures contract at a specified strike price for a specified time.
    Financial Term Letter: C
  • Cancer
    A disease characterized by loss or enhancement of one or more mechanisms that regulate the growth of cells of a specific tissue. Loss of these control mechanisms or gain of abnormal mechanisms in a single cell that put cell growth into overdrive allows that cell to grow, invade local tissue, and to spread to other regions of the body. This spreading of altered cells to distant sites is the process
    Health Care Term Letter: C
  • Cancer Stem Cell
    cancer cells (found within tumors or hematological cancers) that possess characteristics associated with normal stem cells, specifically the ability to give rise to all cell types found in a particular cancer sample.
    Health Care Term Letter: C
  • Capacity Insurance
    The percentage of surplus, or the dollar amount of exposure, that an insurer or reinsurer is willing or able to place at risk. Capacity may apply to a single risk, a program, a line of business or an entire book of business. Capacity may be constrained by legal restrictions, corporate restrictions or indirect restrictions.
    Insurance Term Letter: C
  • Capacity Oil and Gas Operations Industry
    Capacity is defined as the throughput a process unit is capable of sustaining, either on a calendar or stream day basis. The throughput may be expressed in terms of maximum sustainable, nameplate or economic capacity. The maximum sustainable or nameplate capacities may not be the most economical. The economic capacity is the throughput that generally provides the greatest economic benefit based on
    Energy Term Letter: C
  • Capital Asset Pricing Model
    Generates an appropriate discount rate using internal and external inputs to value future cash flows based on the time value of money and the price for bearing uncertainty inherent in an investment.
    Financial Term Letter: C
  • Capital Gain or Capital Loss
    the difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still "on paper" and is considered unrealized.
    Financial Term Letter: C
  • Capital Ratios
    Represents the minimum standards established by the regulatory agencies as a measure to determine whether the regulated entity has sufficient capital to absorb on and off-balance sheet losses beyond current loss accrual estimates.
    Financial Term Letter: C
  • Captive
    A closely-held insurance company whose primary purpose is to provide insurance coverage to the companys owners or their affiliates.
    Insurance Term Letter: C
  • Car Miles per Car Day
    The total car-miles for a period divided by the total number of active cars. Total car-miles includes the distance travelled by every car on a revenue-producing train and a train used in or around our yards. Railroads Industry
    Transportation Term Letter: C
  • Carcinomas
    A type of cancer that arises from the lining cells of the body, called epithelial cells. Epithelial cells form the outer layer of the skin, and the membranes lining the digestive tract, bladder and uterus, as well as the tubes and ducts that run through the bodys organs.
    Health Care Term Letter: C